Finding adequate insurance in America sure can be an annoying process. First you got your life insurance. That's the kind of insurance that means if you or someone you know passes away, there will be some sort of financial compensation given to family afterwards. They have things like "premiums" that need to be paid and it's a whole thing. Not only that, but there are several different types of life insurance such as whole life insurance, term insurance, pension plans, and so on and so forth.

Next are more general insurance types. These are the insurance types that will offer financial protections against things like loss, damage, theft, and other liabilities. Just as the case is with life insurance, there are a boat load of general insurance types as well. You have categories of general insurance that include health insurance, vehicle insurance, travel insurance, home and property insurance, fire insurance, and so on and so forth.

It can probably be a little tricky to figure out just what the gosh darn heck is going on with all of these insurances out there in the wild. Well, hopefully this will clear a few things up about insurance and how they're used. However, if you need some extra help be sure to check here for more insurance reviews.

Some of the biggest things to know about insurance are the following items:

Premiums
When you buy insurance of several different types, you will often have to make many smaller payments over time to the insurance company. These payments are called premiums.

The amount paid in premiums can differ from being quite a bit each month or year, to being very, very little. The difference in the amount paid can be found with something called the deductible. This is the amount of money you will pay in a claim. If you have a high deductible, you take on more risk, but your payments will be far less. People will often choose to have high deductibles in order to save money.

When it comes to premiums, think of this situation. Let's say that you spend $1,000 a year to insure your car. You have paid that $1,000 for five years but have made no insurance claims because you're just that good of a driver. This comes out to be a total of $5,000 that you are paying to the insurance company.

Now, in year 6 of owning that car and making payments, you unfortunately get into an accident. You're okay, but your car is looking a little worse for the wear. You are told that repairs to the vehicle will total $10,000. Insurance will cover that $10,000 even though you have technically only paid them $5,000. Why is that?

It's because insurance companies work by spreading the risk among many, many people. Not all of those people will make have to make claims. However, when someone does make a claim, that money is available to be used to cover the insurance costs incurred by an individual. This is a big reason why insurance companies won't just give you your money back if it was never used. If they did that, they wouldn't have enough money to cover those that make claims and the whole idea behind insurance just wouldn't work.

Insurance Rates
Unfortunately, the amount you pay per year or per month on insurance does not always stay at a single amount. As we discussed above, insurance is a business and businesses like to make money. If something catastrophic happens where a lot of people in a single year make insurance claims, that insurance company is going to lose a lot of money in making payments on those claims.

This is why you will often see insurance rates increasing or decreasing with each new year. A year in which a lot of big payments had to be given to insurance holders may lead to next year's rates being increased, whether or not you were one of those people who made a claim in the previous year or not.

Insurance companies will often look at data from the previous years and make adjustments to rates based on this historical data. The companies will often try to find a balance between increasing rates enough to cover claims for the new year, while making a profit, while still avoid raising rates too high that they push current insurance holders away from doing business with them again.

Hopefully you now have a slightly better understanding of just how insurance works. This was obviously a lot of surface level information. If you would like to learn more, there are plenty of great resources available online, or you may just want to contact an insurance company directly to see how they can best serve you.